Reward the Right Behaviours in Your Finance Team

It won’t be a surprise to you to know that a lot of traditional monetary reward structures (bonuses and incentives) don’t necessarily encourage the behaviours you, as a finance leader, want. A common example of this is in sales organisations, where monthly commission payments can sometimes promote the closure of short-term wins over the execution of long term strategies and fostering of relationships. In finance teams, this is just as common. Deadline-based bonuses may reduce quality, or accuracy, and also can commonly encourage people to focus on just their ‘job’, rather than spending valuable time looking at out-of-role-scope continuous improvement projects. Indeed, you may not even have a reward structure in place outside of basic salary and company benefits – or if you do, it may be based solely on company performance.

So what’s the solution? Set some KPIs and assign a bonus to it?

No – and this is where it can get very tricky. As Steven Kerr argues in his well known article on performance management, “On the Folly of Rewarding A, While Hoping for B”, this approach is one of a number of common management reward “follies”. In simple terms, he argues that relating bonuses to fixed objectives, creates an environment that “achieves goals”, but never sets challenging stretch targets, actually unknowingly rewarding the behaviours that these businesses are trying to transform. It’s an interesting point, and common sense when you look at it in context. If you set in place a system where to receive a bonus, all you need to do is meet set KPIs, you’re limiting not only performance, but creating an environment where people fixate on certain objectives over all others as a way of achieving a periodic boost in pay.

So what can you do to avoid this trap?

#1 Think clearly through what results, or outcomes, you desire your people to achieve

Start with your end-goal. As a finance leader, what are you looking to achieve as a strategic priority? Perhaps it’s an improvement in the quality of financial data, or the establishment of a continuous improvement environment to identify ways to streamline business processes and reduce the month end close?

The trick to creating a reward framework that enhances team performance is to reward the behaviours that will achieve these outcomes. Define the above clearly, as your starting point.

#2 Work backwards to define visible and non-visible behaviours you wish to encourage.

This is where a lot of performance management and reward frameworks unravel. Unfortunately, most of the time, the factors that will decide whether someone gets a bonus in finance will likely revolve around KPIs including timely delivery, job completion, and as Kerr illustrates, “making the numbers”.

What is there to reward someone who thinks outside the box, and outside of his or her role remit, to suggest and then own the delivery of a new automation opportunity for repetitive data entry in the month end close? Or to reward an accountant who doesn’t just deliver the monthly management pack on time, but actually proactively develops a new dashboard for customer analysis that helps the sales team to easily identify unprofitable accounts? These are behaviours you want to encourage, but may not be doing so right now.

#3 Establish your reward framework, and aligned performance matrix to recognise those key behaviours.

In a traditional performance framework, an objective for a ‘hypothetical’ Financial Accountant might be to make sure all their balance sheet reconciliations are completed on time and with minimal error rates. If they achieve this, along with their other objectives (probably also based on time and/or job completion) as part of their reward restructure, they will likely receive a performance bonus.

It’s fair to say that motivating your Accountant to complete the monthly close on time is certainly useful, but if you’re really looking to increase productivity, then as we all know, you need him or her to suggest ways of making this process more efficient – perhaps through automation or better systems utilisation. Therefore, establishing a reward structure that recognises proactive activity over ‘completion’ of tasks, for example by targeting people to initiate and lead 3 mini-projects per year – falling with certain parameters and aligned with your objectives – might be a better way to do it.

Certainly, understanding how to utilise your reward system to cultivate the behaviours you really want to see is a key part to enhancing team performance, not only in the short term, but also for long-term success.

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